This article first appeared in Capital, The Edge Malaysia Weekly on December 30, 2024 - January 12, 2025
OUR top 10 stock picks hit the bullseye in 2024, registering an impressive total return of 57.3%, on average. Their collective performance significantly outpaced the 14.1% gain for the bellwether FBM KLCI and the 16% increase of the FBM Emas Index.
Among the 10 stocks, six appreciated by over one third, two of which at least doubled and two others delivered over 50% returns. All 10 stock picks for 2024 ended in positive territory for the year at the time of writing (Dec 20).
VSTECS Bhd (KL:VSTECS) was the standout performer, delivering an enviable gain of 203.4% in just one year. The company has been a key beneficiary of increased data centre investment in Malaysia. Its earnings jumped by 13.7% year on year (y-o-y) in the first nine months of the financial year ending Dec 31, 2024 (9MFYDec2024), driven by rising demand for data centre equipment and cloud services. As the first appointed Amazon Web Services distributor in Malaysia, VSTECS is well-positioned to capitalise on the country’s increasing cloud adoption. The improved prospects boosted investor confidence, driving its price-to-earnings (PE) ratio from a modest 7.7 times at the beginning of the year to 19 times currently.
Gamuda Bhd (KL:GAMUDA) was our second-best performer, with its share price gaining 113.6% over one year. The company’s revenue jumped 62.4% y-o-y in the fiscal year ended July 31, 2024, driven by robust growth in its engineering and construction segment. The company’s construction order book has surged from RM15 billion in FY2022 to RM25 billion in FY2023 and RM32 billion in FY2024, underpinning robust earnings growth prospects for the coming years. Notable contracts secured during the year included a RM1.7 billion contract to build a hyperscale data centre at Elmina Business Park, a RM3 billion contract for the 187.5MW hydroelectric Ulu Padas Hydroelectric Plant in Sabah and a RM4.3 billion contract for the Xizhi Donghu Mass Rapid Transit project in Taipei. The company’s ability to win contracts, both locally and internationally, demonstrates its capabilities and competitive strength.
United Plantations Bhd (KL:UTDPLT), a plantation company, achieved an impressive 90.2% gain, riding on a 19.1% rise in crude palm oil (CPO) prices. CPO prices have increased from RM3,721 at the end of 2023 to RM4,433 currently, driven by tightening supplies from Indonesia and Malaysia amid lower stockpiles and anticipated higher demand from the upcoming implementation of the B40 biodiesel mandate by the Indonesian government. On top of higher CPO prices, valuation expansion also contributed significantly to the company’s exceptional share price performance in 2024. Despite possessing superior characteristics such as high and improving yield per hectare and a relatively young tree profile, United Plantations was valued at a modest PE ratio of 11.1 times at the end of 2023 — substantially lower than its peers such as IOI Corp Bhd (KL:IOICORP) and Genting Plantations Bhd (KL:GENP), which were trading at 19.5 times and 20.7 times earnings respectively.
Following its share price rally, United Plantations’ valuation has converged closer to its peer group, now trading at 18 times earnings.
KSL Holdings Bhd (KL:KSL) achieved a 51.4% share price gain, capitalising on the improved sentiment in Johor’s property market. The state’s property demand remained robust in 2024, as demonstrated by a 4.9% y-o-y increase in residential property transactions during 9M2024. In 3Q2024, Johor’s house prices grew by 3% y-o-y, outperforming key markets such as Penang (1.8% growth), Kuala Lumpur (0.4% growth) and Selangor (1.3% decline). As a Johor-centric developer with 57% of its land bank concentrated in Johor Bahru, the company is strategically positioned to leverage the expected sustained property demand in the state. Notably, despite the significant share price appreciation, KSL continues to trade at an attractive price-to-book (PB) ratio of 0.4 times, suggesting further upside potential.
Hume Cement Industries Bhd’s (KL:HUMEIND) share price surged by an impressive 44.9% during the year, driven by robust earnings growth. Despite a marginal 0.1% y-o-y revenue increase in the first nine months of calendar year 2024 (9MCY2024), the company’s net profit surged by 30.2% y-o-y. This substantial profit growth stemmed from lower input costs and enhanced manufacturing efficiency.
Similarly, REDtone Digital Bhd (KL:REDTONE) experienced a 23.9% share price appreciation over one year. The company’s revenue jumped 77.7% and net profit rose 94.4% in 9MCY2024. This was primarily attributed to higher earnings from its Managed Telecommunications Network Services, particularly through the execution of large-scale Universal Service Provision projects like Jendela.
LGMS Bhd (KL:LGMS), a cybersecurity service provider, delivered a commendable 33.7% share price appreciation, propelled by sustained growth in cybersecurity service demand. In 9MFYDec2024, the company’s revenue surged by 29% y-o-y, though net profit growth remained relatively modest at 10.1% due to margin compression from escalating staff costs. To meet burgeoning market demand, LGMS rapidly expanded its workforce from 90 employees at the beginning of the year to 160 by November. The recently enacted Malaysia Cyber Security Act 2024 (Act 854), which mandates cybersecurity compliance across 11 Critical National Information Infrastructure sectors, is poised to provide a robust catalyst for the company’s future earnings growth. This legislative framework is expected to create a sustained demand tailwind for LGMS’ cybersecurity services.
Conversely, two stocks did not fare as well in 2024.
INSAS Bhd (KL:INSAS) was initially selected for its significant discount to asset value. Despite this potential, the stock’s share price appreciated only by 4.4% during the year, underperforming the market. The company’s market capitalisation of RM603 million remained substantially depressed compared to its net cash holding of RM1.21 billion and its stake in Inari Amertron Bhd (KL:INARI), which is worth some RM1.59 billion at prevailing prices.
Favelle Favco Bhd (KL:FAVCO), an offshore crane supplier primarily serving the oil and gas sector, experienced a volatile year. The stock initially surged by 19.7% by May 2024 but subsequently retraced as the oil and gas sector outlook deteriorated alongside declining oil prices. This weakening outlook was evident in the company’s order book, which contracted by 26.1%, falling from RM843 million earlier in the year to RM623 million by November. Consequently, its share price concluded the year with a marginal gain of just 0.3%.
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